American wheat export sales also came in above expectations at 633,500.

US corn export sales for last week came inside of expectations at a little more than 734,000.

Some areas of the Midwest missed the rains, but for the most part, there’s more precipitation in the forecast that they’ll likely get a drink within the next week.

Will Crop Tour Show Dryness?

The latest US Drought Monitor shows that the dry conditions are expanding westward. [1]

Montana is “rapidly worsening” according to USDA meteorologist Brad Rippey, while Nebraska and the Dakotas did see some improvement last week. And in Iowa, 70% of the Hawkeye state is experiencing some level of drought.

Will these conditions be showcased in next week’s annual Pro Farmer crop tour? If I’m a betting man, the tour results will likely show numbers closer to that 165 bushels per acre number. As such, I think we’ll be able to see some better prices next week as bullish yield data starts to get published by Chip Flory and company.

However, gains will likely be limited by rains and the continuous challenge of the size of old crop inventories, as mentioned in yesterday’s Breakfast Brief.

We’ll have our own Doug Kirk on tour next week, covering the western stretch. As the tour progresses, we’ll give you Doug’s take.

International Wheat Price Competitions

Millers in Indonesia recently bought 25,000 MT of Canadian hard red spring wheat for November arrival. [2] The delivered price, including transportation costs are about $8.70 USD/bushel or $11 CAD/bushel.

Australia would normally get that busy, but they’ll be harvesting their wheat crop in 4Q2017. Aussie wheat with 10.5% protein is being offered out of their ports at about $6.55 USD/bushel or $8.25 CAD/bushel. Comparably, 11.5% protein Black Sea wheat is being offered out of their ports at $5.85 USD or $7.40 CAD per bushel. If you’re doing the math, that’s better-quality wheat, but for a lower price.

Not hard to do the math there if I’m an international buyer.

How Small is Canada’s Harvest?

While we’ve got the USDA’s estimates already and StatsCanada will come out with their forecasts in 2 weeks, what does the private market think of Canadian crop potential?

Bloomberg’s recent survey of traders and analysts is putting the 2017/18 crop at multi-year lows. [3] Wheat output is expected to come in at 26.4 million tonnes, or 17% lower than last year and the smallest haul since 2011. Similarly, the durum wheat crop is estimated to come in at 5.1 million tonnes, the lowest in 5 years and down 35% year-over-year.

The drop is partly due to the decline in acres planted in Canada this year from last year. The other half of the blame goes to the fact that some areas have received less than 40% of average rainfall since April 1st. The challenge with this though is that it could limit the amount of winter wheat acres that get planted this fall in Western Canada. [4] There is data that backs up the worthiness of planting winter wheat when soil moisture is less than ideal.

On oats, there are concerns that Western Canadian crops ran out of moisture and didn’t fill. [5] Accordingly, below-average test weights are one of the concerns that buyers are considering. However, the largest oats-producing areas have seen enough rainfall that crops are looking about average. That said, cash bids have been trending sideways-to-lower as we get closer to harvest.

Nonetheless, once you have it in the bin, we strongly recommend getting that grain tested to make sure you can ensure you meet buyer’s specs.

For canola, expected production is set at 18.1 million tonnes. Considering that there are about 19-20 million tonnes of demand for Canadian canola forecasted in the 2017/18 crop year, it can be easily considered as bullish. This factor is why, as we mentioned last week, we’re looking to fill contracts and then start to price out canola likely in late fall / early winter.

The good news is that the weather should be decent for harvest in Western Canada this year, according to Drew Lerner of World Weather. [6] The usual threat of frost will start to arrive in early September, but Lerner says that most crops should be advanced by then and to expect limited harm. [7]

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

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About the Author

Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace.
He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead.
In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow.
He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!).
Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

Grain markets this morning are almost all green as U.S. grain prices are seeing the benefit from a weaker U.S. Dollar, but that’s also pushing other currencies higher, including the Canadian Loonie and Brazilian Real.